Mercantile Bank Corp (MBWM) 2024 Q1 法說會逐字稿

Good morning, and welcome to the Mercantile Bank Corporation 2024 First Quarter Earnings Conference Call. (Operator Instructions) Please note this event is being recorded.

早安，歡迎參加商業銀行公司 2024 年第一季財報電話會議。（操作員說明）請注意此事件正在被記錄。

I would now like to turn the conference over to Nichole Kladder, First Vice President, Chief Marketing Officer of Mercantile Bank. Please go ahead.

我現在將會議交給商業銀行第一副總裁兼首席行銷長 Nichole Kladder。請繼續。

Good morning and thank you. Welcome to the Mercantile Bank Corporation's conference call and webcast to discuss the company's financial results for the first quarter of 2024. Joining me today is Bob Kaminski, President and Chief Executive Officer; Chuck Christmas, Executive Vice President and Chief Financial Officer; and Ray Reitsma, Chief Operating Officer and the President of the Bank. We will begin with prepared remarks and a presentation reviewing the quarter's results and open the call to questions.

早安，謝謝。歡迎參加商業銀行公司的電話會議和網路廣播，討論公司 2024 年第一季的財務表現。今天加入我的是總裁兼執行長 Bob Kaminski； Chuck Christmas，執行副總裁兼財務長；以及該銀行首席營運長兼行長 Ray Reitsma。我們將首先準備好評論並進行演示，回顧本季度的業績，然後開始提問。

Before we begin, it is my responsibility to inform you that this call may involve certain forward-looking statements, such as projections of revenue, earnings, and capital structure, as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from any forward-looking statements made today due to factors described in the company's latest Securities and Exchange Commission filings. The company assumes no obligation to update any forward-looking statements made during the call. If anyone does not already have a copy of the first quarter 2024 press release and presentation deck issued by Mercantile today, you can access it on the company's website at www.mercbank.com.

在我們開始之前，我有責任通知您，本次電話會議可能涉及某些前瞻性陳述，例如收入、收益和資本結構的預測，以及有關公司業務計劃和目標的陳述。由於該公司最新的證券交易委員會文件中所描述的因素，該公司的實際結果可能與今天做出的任何前瞻性聲明有重大差異。該公司不承擔更新電話會議期間所做的任何前瞻性陳述的義務。如果有人還沒有 Mercantile 今天發布的 2024 年第一季新聞稿和演示文稿，您可以在該公司網站 www.mercbank.com 上存取。

At this time, I would like to turn the call over to Mercantile's President and Chief Executive Officer, Bob Kaminski. Bob?

現在，我想將電話轉給 Mercantile 總裁兼執行長 Bob Kaminski。鮑伯？

Thank you, Nichole, and thanks to all of you for joining us on the conference call today. This morning, Mercantile released its first quarter 2024 earnings, which reflected a strong start to the year. For the quarter, Mercantile earned $1.34 per share and revenues of $58.2 million. We also announced a cash dividend of $0.35 per share, payable on June 19, 2024. Key themes demonstrated in this performance include solid core local deposit growth, strong asset quality, continuation of our strong commercial loan pipeline, and ongoing focus on near-term and long-term strategic initiatives. Ray and Chuck will have the full details on the first quarter performance shortly.

謝謝你，尼科爾，也謝謝大家今天參加我們的電話會議。今天上午，Mercantile 發布了 2024 年第一季收益，反映出今年的強勁開局。該季度，Mercantile 每股獲利 1.34 美元，營收為 5,820 萬美元。我們也宣布派發每股 0.35 美元的現金股息，將於 2024 年 6 月 19 日支付。這一業績表現出的關鍵主題包括穩定的核心本地存款成長、強勁的資產品質、持續強大的商業貸款管道以及對近期和長期戰略舉措的持續關注。雷和查克很快就會獲得第一季業績的完整細節。

For 26 years, Mercantile Bank has been setting the standard for what a relationship-focused community bank should be. Our customers are at the center of all that our team does. In Mercantile, we understand that the key to developing and maintaining long-term customer relationships is focusing on our customers and delivering what's best for them. We work diligently to understand customers' needs and then craft solutions that provide them the tools to help them reach their financial goals. This is how Mercantile was built and continues to operate today. Many financial institutions seem to place a higher priority on advancing their products ahead of what is optimal for the client.

26 年來，Mercantile Bank 一直在為注重關係的社區銀行設定標準。我們的客戶是我們團隊所做的一切的中心。在 Mercantile，我們知道發展和維持長期客戶關係的關鍵是專注於我們的客戶並為他們提供最好的服務。我們努力了解客戶的需求，然後制定解決方案，為他們提供工具，幫助他們實現財務目標。這就是 Mercantile 的建立方式和至今仍在運作的方式。許多金融機構似乎更重視改進產品，而不是為客戶提供最佳產品。

Another tenet for Mercantile is the desire to develop strong partnerships within the communities we serve. This helps to make better places where we live and work. The manner in which we do business with our clients while operating as a strong corporate citizen will continue to promote and enhance the sustainability of our company and our communities.

Mercantile 的另一個宗旨是希望在我們所服務的社區內建立強有力的合作夥伴關係。這有助於改善我們生活和工作的環境。我們作為強大的企業公民與客戶開展業務的方式將繼續促進和增強我們公司和社區的可持續發展。

Those are my prepared remarks. I'll now turn the call over to Ray and then to Chuck for their comments. Ray?

這些是我準備好的發言。我現在會把電話轉給 Ray，然後轉給 Chuck，徵求他們的意見。射線？

Thank you, Bob. My comments will focus on rightsizing our loan to deposit ratio, deposit growth, loan growth, asset quality, noninterest income, and cost control.

謝謝你，鮑伯。我的評論將重點放在調整貸存比、存款成長、貸款成長、資產品質、非利息收入和成本控制。

Over the last three years, commercial loan growth and mortgage loan growth has been strong. While deposit growth has been solid, it has not kept pace with total loan growth. As a result, the bank's loan to deposit ratio has increased to 110% at year-end 2023 compared to 85% at year-end 2021 when deposits were elevated because of the PPP program and the resulting excess liquidity in the system.

過去三年，商業貸款和抵押貸款成長強勁。雖然存款成長穩健，但未能跟上貸款總額成長的步伐。因此，該銀行的貸存比率在 2023 年底增至 110%，而 2021 年底則為 85%，當時由於 PPP 計劃以及由此導致的系統流動性過剩，存款增加。

We believe that the bank's elevated loan to deposit ratio, which has been a long-term trade at the bank, is a contributing factor to our below peer valuation despite a strong return profile. We are now embarking on a path to alter that element of our business model. The following comments summarize the management initiatives that will contribute to a reduced loan to deposit ratio over time.

我們認為，儘管回報率很高，但該銀行較高的存貸比是該銀行的長期做法，也是導致我們估值低於同業的因素。我們現在正在走上一條改變我們商業模式這一要素的道路。以下評論總結了隨著時間的推移將有助於降低貸存比的管理措施。

We have undertaken a three-pronged approach to building our deposit base, with the objective of reducing the loan to deposit ratio into the mid-90% range over time. First, we will grow the public and municipal realm through strategic personnel additions with existing relationships in this space. Second, an additional focus on small business banking through more efficient underwriting and obtaining the full relationship that characterizes this type of business. Third, a retail customer focus based on total balances, as opposed to activity hurdles, such as transactions or card usage. These efforts led to an increase in deposits in the first quarter of approximately $107 million, an 11% annualized growth rate despite the contrary seasonal pattern typical of the first quarter of reduced deposits as our commercial customers pay bonuses, partnership distributions, and taxes.

我們採取了三管齊下的方法來建立我們的存款基礎，目標是隨著時間的推移將貸存比降低到 90% 左右的範圍。首先，我們將透過策略性人員補充以及該領域的現有關係來擴大公共和市政領域。其次，透過更有效的核保和獲得具有此類業務特徵的完整關係，進一步關注小型企業銀行業務。第三，零售客戶關注的是總餘額，而不是交易或卡片使用等活動障礙。這些努力導致第一季存款增加約 1.07 億美元，年化成長率為 11%，儘管與第一季典型的相反季節性模式存款減少，因為我們的商業客戶支付獎金、合作夥伴分配和稅款。

Mortgage loans have grown substantially over the past few years as borrowers have opted for ARMs rather than fixed rates in the increasing rate environment. We have altered and successfully executed our pricing strategy to encourage the borrower to select the fixed rate that we can in turn sell in the secondary market, rather than funding it on our balance sheet. The positive outcomes include a 117% increase in income on sales of mortgage loans on a year-over-year basis, and a nominal increase during the quarter in mortgage loans on our balance sheet.

過去幾年，抵押貸款大幅成長，因為借款人在利率不斷上升的環境下選擇了 ARM，而不是固定利率。我們已經改變並成功執行了我們的定價策略，以鼓勵借款人選擇我們可以在二級市場上出售的固定利率，而不是在我們的資產負債表上為其提供資金。正面成果包括抵押貸款銷售收入年增 117%，以及本季資產負債表上抵押貸款的名目成長。

Commercial loan growth in the first quarter was $14 million or 1.7% annualized. The fourth quarter of 2023 featured commercial loan growth of 22% annualized, so it is natural that the funding in the current quarter would be somewhat depressed as the pipeline is rebuilt. That has been the case as the current pipeline stands near the long-term trend line established over the last three years, including commitments to fund commercial construction loans of $345 million and residential mortgage loans of $36 million. A reduction in line usage of $27 million during the quarter also impacted our commercial totals.

第一季商業貸款成長 1,400 萬美元，年化成長率為 1.7%。2023年第四季商業貸款年化成長率為22%，因此隨著通路重建，本季的融資自然會有所下降。情況就是如此，因為目前的準備資金接近過去三年建立的長期趨勢線，其中包括承諾為 3.45 億美元的商業建築貸款和 3,600 萬美元的住宅抵押貸款提供資金。本季線路使用量減少 2700 萬美元也影響了我們的商業總額。

Taken together, these strategies produced a loan to deposit ratio of less than 108% as of March 31, 2024, compared to 110% at year-end 2023. This ratio reduces to 102% when giving effect to our sweep account balances. These strategies will also contribute to a more stable net interest margin over time, as the cost of growing money market deposits correlates strongly with our asset-sensitive balance sheet, and the increase in the relative size of our securities portfolio will provide a greater protection to the net interest margin, should rates fall at some point in the future.

總而言之，截至 2024 年 3 月 31 日，這些策略的貸存比率低於 108%，而 2023 年底為 110%。當我們的轉帳帳戶餘額生效時，該比率降至 102%。隨著時間的推移，這些策略也將有助於實現更穩定的淨利差，因為貨幣市場存款成長的成本與我們資產敏感的資產負債表密切相關，而我們證券投資組合相對規模的增加將為投資者提供更大的保障。

Asset quality remains very strong, as non-performing assets totaled $6.2 million at quarter-end or 11 basis points of total assets. Past due loans [number 24], in dollars, represent 2 basis points of total loans. Non-owner-occupied office exposure is $271 million or 6% of total loans. The borrowers in this asset class have performed well and continue to be monitored closely.

資產品質仍然非常強勁，季度末不良資產總額為 620 萬美元，佔總資產的 11 個基點。逾期貸款[數量 24]（以美元計）佔總貸款的 2 個基點。非業主自用辦公室風險敞口為 2.71 億美元，佔貸款總額的 6%。該資產類別的借款人表現良好，並繼續受到密切監控。

We remain vigilant in all of our underwriting standards and monitoring to identify deterioration within our portfolio. Our lenders are the first line of observation and defense to recognize areas of emerging risk. Our risk rating model is robust, with a continued emphasis on current borrower cash flow, providing prompt sensitivity to any emerging challenges within our borrowers' finances. That said, our customers continue to report strong results to date, and have not begun to experience the impacts of a potential recessionary environment in any systemic fashion.

我們對所有承保標準和監控保持警惕，以發現我們投資組合的惡化情況。我們的貸款人是識別新興風險領域的第一道觀察線和防禦線。我們的風險評級模型穩健，持續重視當前借款人現金流，對借款人財務中任何新出現的挑戰提供及時的敏感度。也就是說，我們的客戶迄今為止繼續報告強勁的業績，並且尚未開始以任何系統性方式體驗潛在衰退環境的影響。

Total noninterest income grew 56% during the first quarter of 2024 compared to the first quarter of 2023, with growth reported in every category. Mortgage banking income grew 93% based upon the strategies outlined earlier and the resulting ability to sell a greater portion of originations on the secondary market. Income from interest rate swaps grew 29% as we met our customers' needs for fixed rate financing.

與 2023 年第一季相比，2024 年第一季的非利息總收入成長了 56%，各個類別均出現成長。基於先前概述的策略以及由此產生的在二級市場上出售更多產品的能力，抵押貸款銀行業務收入增加了 93%。滿足客戶固定利率融資需求，利率掉期收入成長29%。

Service charges on accounts grew 56%, reflecting higher activity levels and customer growth and less earnings credit offset to charges based on reduced balances and transaction accounts. Payroll services grew 20% as our offerings continue to build traction in the marketplace. Credit and debit card income grew 3%.

帳戶服務費增加了 56%，反映出活動水準和客戶成長的增加，以及餘額和交易帳戶減少所產生的費用信用抵銷的減少。隨著我們的產品繼續在市場上建立吸引力，薪資服務成長了 20%。信用卡和金融卡收入成長 3%。

Cost control is an ongoing focus, and S&P reports that efficiency ratios have been under pressure in the banking sectors. We are pleased to report that our efficiency ratio is 51% for the first quarter, consistent with the preceding four quarters.

成本控制是持續關注的焦點，標準普爾報告稱，銀行業的效率比率一直面臨壓力。我們很高興地報告，第一季的效率率為 51%，與前四個季度一致。

That concludes my comments. I will now turn the call over to Chuck.

我的評論到此結束。我現在將把電話轉給查克。

Thanks, Ray. Good morning to everybody. As noted on slide 5, this morning, we announced net income of $21.6 million or $1.34 per diluted share for the first quarter of 2024 compared with net income of $21 million or $1.31 per diluted share for the respective prior-year period. The improvement primarily reflects a higher level of noninterest income, which more than offset a lower level of net interest income, larger provision expense, and increased noninterest expenses.

謝謝，雷。大家早安。如投影片5 所示，今天上午，我們宣布2024 年第一季淨利潤為2,160 萬美元，即稀釋後每股收益1.34 美元，而去年同期淨利潤為2,100 萬美元，即稀釋後每股收益1.31美元。這項改善主要反映了非利息收入水準的提高，這足以抵消淨利息收入水準的降低、撥備費用的增加以及非利息支出的增加。

Turning to slide 7, interest income on loans increased during the first quarter of 2024 compared to the respective prior-year period, reflecting an increased interest rate environment and solid growth in commercial and residential mortgage loans. Our first quarter of 2024 loan yield was 75 basis points higher than the first quarter of 2023, with average loans up over 9% over the respective period. The improved loan yield largely reflects the combined impact of an aggregate 100-basis-point increase in the federal funds rate since the beginning of 2023 and approximately two-thirds of our commercial loans having a floating rate. Interest income on securities also increased during the first quarter of 2024 compared to the first quarter of 2023, reflecting growth in the securities portfolio and the higher interest rate environment.

轉向幻燈片 7，與去年同期相比，2024 年第一季貸款利息收入有所增加，反映出利率環境的改善以及商業和住宅抵押貸款的穩健增長。我們 2024 年第一季的貸款收益率比 2023 年第一季高出 75 個基點，同期平均貸款成長超過 9%。貸款收益率的提高在很大程度上反映了自 2023 年初以來聯邦基金利率總計上漲 100 個基點以及我們約三分之二的商業貸款採用浮動利率的綜合影響。與 2023 年第一季相比，2024 年第一季的證券利息收入也有所增加，反映了證券投資組合的成長和較高的利率環境。

Interest income on other earning assets, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, increased during the first quarter of 2024 compared to the first quarter of 2023, in large part reflecting a higher average balance and an increased yield. In total, interest income was up $16.2 million during the first quarter of 2024 compared to the respective prior-year period.

與2023 年第一季相比，2024 年第一季其他獲利資產的利息收入（其中絕大多數由存放在芝加哥聯邦儲備銀行的資金組成）有所增加，這在很大程度上反映了平均餘額和利息收入的增加。與去年同期相比，2024 年第一季的利息收入總計增加了 1,620 萬美元。

We recorded increased interest expense on deposits in our sweep account product during the first quarter of 2024 compared to the first quarter of 2023, reflecting the increased interest rate environment, money market and time deposit growth, transfers of deposits from no- or low-cost deposit products to higher-costing deposit products, and enhanced competition for deposits. Our first quarter of 2024 cost of deposits was 138 basis points higher than the first quarter of 2023.

與 2023 年第一季相比，2024 年第一季我們的掃帳產品存款利息支出增加，反映了利率環境的改善、貨幣市場和定期存款的成長、無成本或低成本存款的轉移存款產品轉向成本較高的存款產品轉變，存款競爭加劇。我們 2024 年第一季的存款成本比 2023 年第一季高出 138 個基點。

Interest expense on Federal Home Loan Bank of Indianapolis advances also increased during the first quarter of 2024 compared to the respective prior-year period, reflecting growth in the advanced portfolio and the higher interest rate environment. Interest expense on other borrowed funds increased during the first quarter of 2024 compared to the first quarter of 2023, reflecting the higher interest costs of our trust preferred securities. In total, interest expense was $17.3 million during the first quarter of 2024 compared to the respective prior-year period.

與去年同期相比，印第安納波利斯聯邦住房貸款銀行預付款的利息支出在 2024 年第一季也有所增加，反映了高級投資組合的成長和較高的利率環境。與 2023 年第一季相比，2024 年第一季其他借入資金的利息支出增加，反映出我們的信託優先證券的利息成本較高。與去年同期相比，2024 年第一季的利息支出總計為 1,730 萬美元。

Net interest income decreased $1 million during the first quarter of 2024 compared to the first quarter of 2023. Our net interest margin declined 54 basis points during the first quarter of 2024 compared to the same quarter in 2023. Although our yield on earning assets increased 71 basis points during that time period, our cost of funds was up 125 basis points.

與 2023 年第一季相比，2024 年第一季淨利息收入減少了 100 萬美元。與 2023 年同一季度相比，2024 年第一季我們的淨利差下降了 54 個基點。儘管我們的生息資產收益率在此期間增加了 71 個基點，但我們的資金成本卻增加了 125 個基點。

While we experienced rapid growth in our earning asset yield during the period of March of 2022 through July of 2023, when the FOMC raised the federal funds rate by 525 basis points, meaningful increases in our cost of funds did not begin to materialize until the latter part of 2022, when competition for deposit balances increased deposit rates and depositors began to move funds from no- and lower-costing deposit types to higher-costing deposit products. Our net interest margin peaked during the latter part of 2022 and the early stages of 2023.

儘管在2022 年3 月至2023 年7 月期間，當FOMC 將聯邦基金利率提高525 個基點時，我們的盈利資產收益率快速增長，但直到2023 年7 月，我們的資金成本才開始出現有意義的成長。我們的淨利差在2022年下半年和2023年初期達到高峰。

We recorded a provision expense of $1.3 million during the first quarter of 2024 compared to $0.6 million during the first quarter of 2023. The first quarter of 2024 provision expense primarily reflects a specific allocation for a non-performing commercial loan relationship. Additional allocations were needed to reflect loan growth and a change in a commercial loan environmental factor, while reduced allocations were made due to an improved economic forecast and changes in loan portfolio composition. Noninterest expenses increased $1.3 million during the first quarter of 2024 compared to the first quarter of 2023, primarily reflecting increased compensation and benefit costs.

我們在 2024 年第一季記錄的撥備費用為 130 萬美元，而 2023 年第一季為 60 萬美元。2024年第一季撥備支出主要反映不良商業貸款關係的專案分配。需要額外的撥款來反映貸款成長和商業貸款環境因素的變化，而由於經濟預測的改善和貸款組合構成的變化而減少了撥款。與 2023 年第一季相比，2024 年第一季非利息支出增加了 130 萬美元，主要反映了薪資和福利成本的增加。

Slide numbers 15 through 17 depict information on our investment portfolio. There were only nominal changes to our investment portfolio during the first quarter of 2024, largely limited to ordinary purchases of municipal bonds and maturities of US government agency bonds and municipal bonds. All of our investments were being categorized as available for sale.

投影片 15 至 17 描述了我們投資組合的資訊。2024 年第一季度，我們的投資組合僅發生了名義上的變化，主要限於普通購買市政債券以及到期的美國政府機構債券和市政債券。我們所有的投資都被歸類為可供出售。

As of March 31, 2024, about 63% of our investment portfolio was comprised of US government agency bonds, with approximately 32% comprised of municipal bonds, all of which were issued by municipal entities within the state of Michigan and a high percentage within our market areas. Mortgage-backed securities, all of which are guaranteed by US government agencies, comprise only about 5% of the investment portfolio.

截至2024 年3 月31 日，我們的投資組合約63% 由美國政府機構債券組成，約32% 由市政債券組成，所有這些債券均由密西根州的市政實體發行，並且在我們的投資組合中所佔比例很高。抵押貸款擔保證券均由美國政府機構擔保，僅佔投資組合的 5% 左右。

The maturities of the US government agency in municipal bonds segments are generally structured on a laddered basis. A significant majority of the US government agency bonds mature within the next seven years, with over three-fourths of our municipal bonds maturing over the next 10 years. The net unrealized loss totaled $67 million as of March 31, 2024, compared to $64 million at year-end 2023, and $71 million as of March 31, 2023.

美國政府機構在市政債券領域的期限通常是階梯式的。絕大多數美國政府機構債券將在未來 7 年內到期，超過四分之三的市政債券將在未來 10 年內到期。截至 2024 年 3 月 31 日，未達到淨虧損總計 6,700 萬美元，而 2023 年底為 6,400 萬美元，截至 2023 年 3 月 31 日為 7,100 萬美元。

Slide numbers 19 through 21 depict data on our deposit base. You will note that we include sweep accounts in our deposit tables and calculations, as those accounts reflect monies from entities, primarily municipalities and other larger customers who have elected to place their funds in our sweep account that is fully secured by US government agency bonds.

第 19 至 21 號投影片描述了我們存款基礎的數據。您會注意到，我們的存款表和計算中包括了轉款帳戶，因為這些帳戶反映了來自實體（主要是市政當局和其他較大客戶）的資金，這些客戶選擇將資金存入我們的轉款帳戶，該帳戶完全由美國政府機構債券擔保。

On slide number 21, we depict our deposit balances as of March 31, 2024, and year-end 2023. As a commercial bank, a majority of our deposits are comprised of commercial accounts. Noninterest-bearing checking accounts equated to 27% of deposits and sweep accounts as of March 31, 2024, similar to historical levels. A large portion of these funds are associated with commercial lending relationships, especially commercial and industrial companies. As typical, noninterest-bearing checking account balances declined during the early stages of the first quarter, reflecting withdrawals by commercial customers to make bonus and tax payments in partnership distributions.

在第 21 號投影片上，我們描述了截至 2024 年 3 月 31 日和 2023 年底的存款餘額。作為一家商業銀行，我們的存款大部分來自商業帳戶。截至 2024 年 3 月 31 日，無利息支票帳戶相當於存款和周轉帳戶的 27%，與歷史水準相似。這些資金很大一部分與商業借貸關係有關，尤其是商業和工業公司。與典型情況一樣，無利息支票帳戶餘額在第一季初期有所下降，反映出商業客戶提款以支付合夥人分配中的獎金和稅款。

We experienced solid growth within our money market and time deposit portfolios during the first quarter of 2024, reflecting growth from existing customers and initial deposits from new customers. The level of uninsured deposits, totaling about 48% as of March 31, 2024, has remained relatively steady over many years.

2024 年第一季度，我們的貨幣市場和定期存款投資組合實現了穩健成長，反映出現有客戶和新客戶初始存款的成長。截至 2024 年 3 月 31 日，未保險存款水準總計約為 48%，多年來一直保持相對穩定。

On slide number 20, we provide information on depositors with balances of $5 million or more. At the end of the first quarter, we had 76 relationships which aggregated $1.2 billion. About 80% of the relationships and approximately 83% of the total deposits were with businesses and or individuals, with the remaining comprised of public entities. When compared to five years ago, we had 41 relationships with deposit balances over $5 million, aggregating $521 million. Of those 41 relationships, 32 continue to have balances over $5 million, and have grown those deposit balances by almost $300 million in aggregate.

在第 20 號投影片上，我們提供了餘額為 500 萬美元或以上的儲戶的資訊。截至第一季末，我們擁有 76 個關係，總價值達 12 億美元。約 80% 的關係和約 83% 的存款總額與企業和/或個人有關，其餘由公共實體組成。與五年前相比，我們有 41 個存款餘額超過 500 萬美元的關係，總計 5.21 億美元。在這 41 個關係中，有 32 個的餘額繼續超過 500 萬美元，而這些存款餘額總計增加了近 3 億美元。

We remain in a strong and well-capitalized regulatory capital position. Our bank's total risk-based capital ratio was 13.8% at the end of the first quarter, almost $200 million above the minimum threshold to be categorized as well-capitalized. We did not repurchase shares during the first quarter of 2024. We have $6.8 million available in our current repurchase plan.

我們仍然處於強大且資本充足的監管資本地位。截至第一季末，我行的總創投率為 13.8%，比資本充足的最低門檻高出近 2 億美元。我們在 2024 年第一季沒有回購股票。我們目前的回購計劃中有 680 萬美元可用。

While net unrealized gains and losses in our investment portfolio are excluded from regulatory capital calculations, on slide number 18, we depict our Tier 1 leverage capital ratio and our total risk-based capital ratios, assuming the calculation did include that adjustment. While our regulatory capital ratios were negatively impacted by the pro forma calculations, our capital position remains strong. As of March 31, 2024, our Tier 1 capital ratio declines from 12.3% to 11.3%, and our total risk-based capital ratio declines from 13.8% to 13%. Our excess capital, as measured by the total risk-based capital ratio, is also negatively impacted. However, it totals a strong $150 million over the minimum regulatory amount to be categorized as well-capitalized.

雖然我們的投資組合中的未實現淨收益和損失不包括在監管資本計算中，但在第18 張幻燈片中，我們描述了我們的一級槓桿資本比率和基於風險的總資本比率，假設計算確實包括該調整。儘管我們的監理資本比率受到備考計算的負面影響，但我們的資本狀況仍然強勁。截至2024年3月31日，我們的第一級資本比率從12.3%下降至11.3%，總創投比率從13.8%下降至13%。我們的超額資本（以總風險資本比率衡量）也受到負面影響。然而，其總金額比資本充足的最低監管金額高出 1.5 億美元。

On slide 23, we share our latest assumptions on the interest rate environment and key performance metrics for the remainder of 2024, with the caveat that market conditions remain volatile, making forecasting difficult. This forecast is predicated on the federal funds rate staying unchanged during the second quarter of this year, and then declining by 25 basis points during both the third and fourth quarters.

在投影片 23 中，我們分享了對利率環境和 2024 年剩餘時間關鍵績效指標的最新假設，但需要注意的是，市場狀況仍然不穩定，導致預測變得困難。這項預測的前提是聯邦基金利率在今年第二季保持不變，然後在第三和第四季下降 25 個基點。

We continue to project loan growth in a range of 4% to 6%. We are forecasting our net interest margin to decline during the second and third quarters, in large part reflecting continued growth in higher-costing money market and time deposits, along with a higher portion of our asset base invested in securities and on deposit with the Federal Reserve Bank of Chicago. We expect noninterest income and noninterest expense to be relatively stable during the remainder of this year.

我們繼續預期貸款成長在 4% 至 6% 的範圍內。我們預計第二季和第三季的淨利差將下降，這在很大程度上反映了成本較高的貨幣市場和定期存款的持續成長，以及我們資產基礎中投資於證券和聯邦存款的比例增加。我們預計今年剩餘時間內非利息收入和非利息支出將相對穩定。

In closing, we are very pleased with our first quarter 2024 operating results and financial condition, and believe we remain well positioned to continue to successfully navigate through the myriad of challenges faced by all financial institutions. Those are my prepared remarks. I'll now turn the call back over to Bob.

最後，我們對 2024 年第一季的經營業績和財務狀況感到非常滿意，並相信我們仍然處於有利地位，能夠繼續成功應對所有金融機構面臨的無數挑戰。這些是我準備好的發言。我現在將把電話轉回給鮑伯。

Thank you, Chuck. That concludes management's prepared comments, and we'll now open the call for Q&A session.

謝謝你，查克。管理階層準備好的評論到此結束，我們現在將開始問答環節。

(Operator Instructions) Brendan Nosal, Hovde Group.

（操作員說明） Brendan Nosal，Hovde Group。

Maybe just to start off here, there was a pretty meaningful transaction announced in your neck of the woods yesterday afternoon. I know it was less than 24 hours out since it was announced, but any preliminary thoughts on how it may impact your market and Mercantile and where you might like to capitalize on any talent dislocation opportunities that might arise?

也許只是從這裡開始，昨天下午在您附近宣布了一項非常有意義的交易。我知道自宣布以來還不到 24 小時，但對於它可能如何影響您的市場和商業以及您可能希望在哪些方面利用可能出現的人才錯位機會，您有什麼初步想法嗎？

Yeah. That is exactly our thought, that there may be some opportunity surrounding this announcement. And employees, customers will both be in play over some period of time, and we will seek to take advantage of that.

是的。這正是我們的想法，即這項公告可能存在一些機會。員工、客戶都會在一段時間內發揮作用，我們將尋求利用這一點。

All right. Perfect. Perhaps one more from me before I step back. Maybe just on the margin longer term, I know the idea of an aggressive Fed cut or cuts keeps getting pushed out. But just curious how you think about the margin, when and if the Fed does start cutting meaningfully. Like, are you still very asset-sensitive in that scenario? Or you've taken enough margin pain over the last 12 months that Fed cuts aren't as impactful as they once may have been?

好的。完美的。在我退後一步之前，也許我還會再寄一封信。也許只是從長遠來看，我知道聯準會大幅降息的想法不斷被淘汰。但只是好奇你如何看待利潤率，以及聯準會何時以及是否開始有意義地降息。例如，在這種情況下你仍然對資產非常敏感嗎？或者您在過去 12 個月中已經承受了足夠的保證金痛苦，以至於聯準會降息的影響力不如以前？

Yeah, this is Chuck. I think one of the things that we've seen as was fully expected is our balance sheet fully repriced over the last few years. Our margin has settled down back to its historical average of 3.5% to 3.6%. And as I stated a few minutes ago, it's where we expect it to settle out as we get towards the end of this year.

是的，這是查克。我認為我們完全預料到的事情之一是我們的資產負債表在過去幾年中完全重新定價。我們的利潤率已回落至 3.5% 至 3.6% 的歷史平均值。正如我幾分鐘前所說，我們預計到今年年底，情況就會穩定下來。

I think, clearly, we look at our asset sensitivity and manage our deposit structure and our FHLB advances along with the overall interest rate structure of our loan portfolios and investment portfolio to try to manage through changing interest rate environments. I think, clearly, if the Fed was to lower rates 500 basis points like they just raised them, it's a very different scenario than what is really is being talked about out there is maybe some interest rate declines the back half of this year and maybe several more next year.

我認為，顯然，我們會審視我們的資產敏感性，管理我們的存款結構和 FHLB 預付款，以及貸款組合和投資組合的整體利率結構，以嘗試應對不斷變化的利率環境。我認為，顯然，如果聯準會像剛剛升息一樣將利率降低 500 個基點，那麼這與實際討論的情況非常不同，今年下半年利率可能會有所下降，也許明年還會有幾個。

I am very comfortable with our expected margin performance under the current market expectations. Clearly, if the Fed was to very aggressively lower interest rates, that would have a bigger upfront impact, just because our assets would be priced faster than our liabilities, going through the opposite of what we just went through and then everything else would catch up. I think we've been working very hard, and Ray made a couple of comments on it in his prepared remarks of working with the deposit portfolio, wanting to grow that as meaningfully as we can, but also with an eye to helping to manage interest rate risk and changing interest rate environment, especially in a decline interest rate environment.

我對目前市場預期下我們的預期利潤率表現非常滿意。顯然，如果聯準會大幅降低利率，那將產生更大的前期影響，因為我們的資產定價速度將快於負債，經歷與我們剛剛經歷的相反的情況，然後其他一切都會迎頭趕上。我認為我們一直在非常努力地工作，雷在他準備好的存款投資組合工作發言中對此發表了一些評論，希望盡可能有意義地發展存款組合，但同時也著眼於幫助管理利息利率風險和不斷變化的利率環境，尤其是利率下降的環境。

All right. Fantastic. Thank you for taking my questions.

好的。極好的。感謝您回答我的問題。

You bet.

你打賭。

Daniel Tamayo, Raymond James.

丹尼爾·塔馬約，雷蒙德·詹姆斯。

Maybe we just start on credit, obviously, thing's still very strong for you guys. I mean, NPL trends slightly up, but still very low. But just curious first on your thoughts on where you might expect those NPL trends to continue from here. I mean, I noticed you took reserves up a little bit, a few basis points. And just curious also what the driver was for that and where you might see reserves go.

也許我們只是從賒帳開始，顯然，對你們來說事情仍然很強勁。我的意思是，不良貸款趨勢略有上升，但仍然很低。但首先我想知道您對這些不良貸款趨勢可能會從現在開始繼續發展的想法。我的意思是，我注意到你增加了一點準備金，幾個基點。我只是好奇司機的目的是什麼，以及你可能會看到儲備金去哪裡。

Well, in general, in the very near future, we have a few events that we're planning or that our customers are planning in helping us to reduce the NPLs that are on our books. And I'd expect that we'll continue in the foreseeable future in a similar range that we're in now. Obviously, it wouldn't take much to change because the NPL amounts are so small, but there is good credit quality throughout all segments of our portfolio, and we feel that the economies that we operate in continue to be strong and our borrowers continue to report good results.

嗯，總的來說，在不久的將來，我們正在計劃或我們的客戶正在計劃一些活動來幫助我們減少帳面上的不良貸款。我預計，在可預見的未來，我們將繼續保持與現在類似的範圍。顯然，不需要太多改變，因為不良貸款金額很小，但我們投資組合的所有部分都有良好的信用質量，我們認為我們所在的經濟體繼續強勁，我們的借款人繼續報告良好的結果。

Hi, this is Chuck, Danny. I would make just a couple of comments on the loan loss reserve. You're obviously, using the CECL model. I think as everybody knows, there's really two -- and there's a lot of different inputs there, but there's really two that would have the most significant input. One, obviously, is the economic forecast, which we use a third-party independent forecast. Those continue to be relatively favorable, and I think match what the market is really expecting, and even some of the Fed forecasts that are out there.

嗨，這是查克，丹尼。我只想對貸款損失準備金發表幾點評論。顯然，您正在使用 CECL 模型。我想眾所周知，確實有兩個——而且有很多不同的輸入，但實際上有兩個擁有最重要的輸入。其中之一顯然是經濟預測，我們使用第三方獨立預測。這些仍然相對有利，我認為符合市場的真正預期，甚至符合聯準會的一些預測。

And of course, the other big driver would be our loan loss reserve is highly predicated on the grading system through our commercial loan portfolio. So if we were to see meaningful grade changes that would have an impact on the reserve calculation as well. Again, based on our comments, we're not really forecasting any significant change in the economy. And with that, we would expect the grades within our commercial loan portfolio to stay relatively steady as well.

當然，另一個重要驅動因素是我們的貸款損失準備金很大程度上取決於我們商業貸款組合的分級系統。因此，如果我們看到有意義的品位變化，也會對儲量計算產生影響。同樣，根據我們的評論，我們並沒有真正預測經濟會發生任何重大變化。因此，我們預期商業貸款組合的評級也將保持相對穩定。

Appreciate all that color. That's helpful. Maybe I'd just dig a little bit more into the office portfolio. I think I heard you guys say it was $271 million of non-owner-occupied office. Is that correct?

欣賞所有這些顏色。這很有幫助。也許我只是想更深入地研究辦公室的投資組合。我想我聽你們說那是價值 2.71 億美元的非業主自用辦公室。那是對的嗎？

Correct.

正確的。

Okay. Is there anything else you can provide us in terms of data on that portfolio, in terms of LTVs or occupancy rates or geography of the location of those office buildings? Just curious what other details you have on those loans.

好的。您還可以向我們提供有關該投資組合的數據、LTV 或入住率或這些辦公大樓位置的地理位置方面的其他資訊嗎？只是好奇您對這些貸款還有哪些其他詳細資訊。

Well, the majority of those loans are in Grand Rapids in terms of geography. In terms of credit characteristics, the vast, vast majority of them have personal recourse. All of them continue to have positive cash flow and debt coverage ratios at this time. We're watching that very closely. The tenant situations in each of the projects appears to be stable and that's obviously something that can change, so we're watching that closely, but so far so good. And so, with those traits, we feel that there is some sustainability to that 6% of our loan portfolio.

嗯，從地理位置來看，這些貸款大部分都在大急流城。從信用特質來看，絕大多數、絕大多數具有個人追索權。目前，所有這些公司都繼續擁有正的現金流和債務覆蓋率。我們正在非常密切地關注這一點。每個項目的租戶情況似乎都很穩定，這顯然是可以改變的，所以我們正在密切關注，但到目前為止一切都很好。因此，鑑於這些特徵，我們認為我們貸款組合的 6% 具有一定的可持續性。

Okay. And have there been any transactions of office buildings in Grand Rapids that give you a sense for how much or if prices have moved in the last few years?

好的。大急流城的辦公大樓是否有任何交易，可以讓您了解過去幾年價格的變動幅度或是否變動？

None leap to mind in very recent times. I could be wrong about that, but I can't think of any at the moment.

最近一段時間，沒有人想到這一點。我的想法可能是錯的，但我現在想不出來。

Okay. Thanks for taking my questions.

好的。感謝您回答我的問題。

You bet.

你打賭。

Damon DelMonte, KBW.

達蒙·德爾蒙特，KBW。

Just wanted to start off on fee income this quarter. It looks like treasury management, which I believe is captured in the other line item, was particularly strong. I guess, first, Chuck, can you confirm, is that the line that it was categorized in? And then secondly, what's your thought on the outlook there over the next few quarters?

只是想從本季的費用收入開始。看起來資金管理特別強大，我相信這一點在其他項目中得到了體現。我想，首先，查克，你能確認一下，這是它被分類的那一行嗎？其次，您對未來幾季的前景有何看法？

Yeah. I think most of our -- when we talk about treasury management, there's a handful of prongs there. From your normal day-to-day cash management, most of those fees are in service charges. They get blended in with earnings credit rates and those types of things. So it's a very blended calculation that takes place. We would also include our payroll, human capital management products, as well as our card products, our debit and credit products. That's dominated by commercial customers using them for some of their cash flow needs.

是的。我認為，當我們談論財務管理時，我們的大多數人都會有一些分歧。從您正常的日常現金管理來看，大部分費用都是服務費。它們與收益信用利率和類似的東西混合在一起。所以這是一個非常混合的計算。我們還將包括我們的薪資、人力資本管理產品，以及我們的卡片產品、金融卡和信用卡產品。這主要是商業客戶使用它們來滿足一些現金流需求。

So when we talk about treasury management, it's those three broad categories that we think about. We expect all of those to continue to grow as they have been, as we continue to grow our customer base, especially in the C&I segment of our loan portfolio, as we bring those customers on, get the full deposit relationships, and are able to also offer them all a myriad of different cash management, treasury management products.

因此，當我們談論資金管理時，我們考慮的是這三大類。我們預計所有這些將繼續像以前一樣增長，因為我們不斷擴大我們的客戶群，特別是在我們貸款組合的 C&I 部分，因為我們吸引了這些客戶，獲得了完整的存款關係，並且能夠還為他們提供無數不同的現金管理、資金管理產品。

On page 23, we gave guidance in regards to our fee income. We had a very solid quarter for swap income, like commercial loan growth that can be lumpy from quarter to quarter, just given the attributes within that commercial loan portfolio. But we're obviously very pleased to have that product, not only the income upfront, which is great, obviously, but really, the primary reason for getting into that product and staying in that product is to manage longer-term interest rate risk of eaningfully sized credits. We're generally not going to offer fixed rates too, so we feel that's a significant interest rate risk management tool, but obviously provides some solid fee income upfront.

在第 23 頁，我們提供了有關費用收入的指導。我們的掉期收入季度非常穩定，就像商業貸款成長一樣，考慮到商業貸款投資組合的屬性，每季的商業貸款成長可能會出現波動。但我們顯然非常高興擁有該產品，不僅是預付收入，這顯然很棒，但實際上，進入該產品並留在該產品的主要原因是管理長期利率風險大量的學分。我們通常也不會提供固定利率，因此我們認為這是一個重要的利率風險管理工具，但顯然會預先提供一些可靠的費用收入。

Very pleased with our mortgage banking operation in the first quarter. That performed very well, well above what we had budgeted. And the pipeline and the conditions are looking positive for that as well.

對我們第一季的抵押貸款銀行業務非常滿意。效果非常好，遠遠超出了我們的預算。管道和條件看起來也有利於這一點。

The big item in the other income was we do have a relatively small investment in a local Michigan-based private equity fund that makes investments that qualify for CRA credit. That fund has been performing very well and we were able to reflect some of that within our income statement for the first quarter.

其他收入中最重要的一項是，我們確實對密西根州當地一家私募股權基金進行了相對較小的投資，該基金的投資符合 CRA 信貸資格。該基金的表現非常出色，我們能夠在第一季的損益表中反映其中的一些表現。

Again, some of those stuff gets a little bit lumpy from quarter to quarter, whether the swaps, mortgage banking or private equity, those types of things. But on page 23, we gave our thoughts for the remainder of 2024 relative to the first quarter. We are not expecting fee income to be as strong, but we do expect it to be solid and meaningful to our overall operations -- operating performance.

同樣，其中一些東西每個季度都會變得有點不穩定，無論是掉期、抵押貸款銀行還是私募股權，這些類型的東西。但在第 23 頁，我們給了 2024 年剩餘時間相對於第一季的想法。我們預計費用收入不會那麼強勁，但我們確實預期它對我們的整體營運（經營業績）來說是穩定且有意義的。

Got it. Okay. Appreciate that color and clarification on how the treasury management fees are captured.

知道了。好的。欣賞這種顏色以及如何獲取財務管理費的澄清。

Welcome.

歡迎。

Okay. And then, with respect to the margin and the outlook, I think Ray may have said it or Chuck, you may have said it in the prepared remarks about the revised outlook and the driver of the lower outlook or lower range for the margin. Was that more attributable to the ongoing efforts to bring on deposits? Or is that just a function of the asset sensitivity and maybe expectation of rate cuts later in the year?

好的。然後，關於利潤率和前景，我認為雷可能已經說過了，或者查克，你可能已經在準備好的關於修訂後的前景以及較低前景或較低利潤範圍的驅動因素的評論中說過了。這是否更多地歸因於持續不斷的吸引存款的努力？或者這只是資產敏感性以及今年稍後降息預期的函數？

No, I think there's definitely a little bit on the rate cuts there, Damon. As we mentioned, we've got a couple in the back half. But I think we're pretty well balanced when you're only looking at, say, 50 basis points of decline over six months. We don't really have any significant timing issues that are there.

不，我認為肯定有一點降息，達蒙。正如我們所提到的，我們在後半部分有幾個。但我認為，當你只考慮六個月內下降 50 個基點時，我們已經相當平衡了。我們確實沒有任何重大的時間問題。

I think the big thing with the margin going forward, and you already touched on it, is the growth in our deposits base, which obviously we're trying very hard to grow local deposits. And obviously, in this environment, most of that's going to come in the money market and the time deposit categories, which obviously are the higher-cost deposits that we have in there.

我認為未來利潤率的最大問題是我們的存款基礎的成長，顯然我們正在努力增加本地存款，而您已經談到了這一點。顯然，在這種環境下，大部分資金將進入貨幣市場和定期存款類別，這顯然是我們在那裡擁有的成本較高的存款。

Now having said that, we do expect our noninterest-bearing checking accounts to have meaningful growth as well, especially as our current customers rebuild after paying their payments that they do generally in January of each year, but also as we continue to get growth within the C&I segment of our loan portfolio.

話雖如此，我們確實預計我們的無息支票帳戶也會有有意義的增長，特別是當我們現有的客戶在支付他們通常在每年一月份的付款後重建時，而且隨著我們在我們貸款組合的C&I 部分。

I think there is also some benefits. We do have some, I would say, very low-yielding investments that are set to mature over the next several years. And whether we reinvest those into investments or put those in the loan portfolio, more likely to go in the investment portfolio at this point in time, those will reprice very appreciably, which will help set off some of the extra costs or additional cost that we will have in our deposit structure. And we do have some loans that were made three and five years ago that are coming up for maturity balloons that we will be able to reprice as well. So on an overall basis, we think the margin will stay relatively steady.

我認為也有一些好處。我想說，我們確實有一些非常低的投資，這些投資將在未來幾年內成熟。無論我們將這些資金再投資於投資還是將其納入貸款投資組合（此時更有可能納入投資組合），這些投資組合的價格都會非常明顯地重新定價，這將有助於抵消我們的一些額外成本或額外成本。我們確實有一些三、五年前發放的貸款，這些貸款即將到期，我們也將能夠重新定價。因此，總體而言，我們認為利潤率將保持相對穩定。

I guess I should add one more thing is, in addition to growing the investment portfolio as a percent of assets over the next several years, we are operating with a higher level of on-balance sheet liquidity, which while as I said, it's not a bad rate, certainly, it's a lower rate than what we would get in the loan portfolio. So there's a little bit of a dampening of our margin from that standpoint as well. But given the environment, our overall balance sheet structure, we think it's prudent to operate with a higher level of overnight liquidity at the current time.

我想我還應該補充一件事，除了在未來幾年增加投資組合佔資產的百分比之外，我們正在以更高水平的表內流動性運營，儘管正如我所說，這並不是當然，這是一個不良利率，它比我們在貸款組合中獲得的利率要低。因此，從這個角度來看，我們的利潤率也有所下降。但考慮到環境和我們的整體資產負債表結構，我們認為目前以較高水準的隔夜流動性進行操作是謹慎的。

Got it. Okay. Great. And then just lastly, on the loan guide, is that in any way being constrained by trying to not outpace the deposit growth that you're targeting to achieve? Or is the 4% to 6% loan growth just indicative of the market opportunities that are in front of you guys right now?

知道了。好的。偉大的。最後，在貸款指南上，這是否會受到試圖不超過您目標實現的存款成長的限制？或者說 4% 到 6% 的貸款成長只是顯示你們現在面臨的市場機會？

That's a great question. And we think that it does reflect the opportunities in the market. We're not dialing back our loan growth. There may be a very sliver of selectivity within that, where we look at our existing portfolio and say, hey, this relationship doesn't have the full characteristics that we're looking for in terms of deposits accompanying loans, and those may deselect out of the bank and have a bit of a dampening effect. But the overall addition of new credits and new opportunities to the bank, we don't expect to see that decrease at all.

這是一個很好的問題。我們認為這確實反映了市場的機會。我們不會縮減貸款成長。其中可能存在非常小的選擇性，我們查看現有的投資組合併說，嘿，這種關係不具備我們在存款伴隨貸款方面尋找的全部特徵，並且這些特徵可能會取消選擇銀行的影響，並有一定的抑製作用。但從整體銀行新增信貸和新機會來看，我們預期這種情況根本不會減少。

Got it. Okay. Great. That's all I had. Thank you very much.

知道了。好的。偉大的。這就是我所擁有的一切。非常感謝。

Thank you, Damon.

謝謝你，達蒙。

This concludes our question-and-answer session. I would like to turn the conference back over to Bob Kaminski for any closing remarks.

我們的問答環節到此結束。我想將會議轉回給鮑勃·卡明斯基（Bob Kaminski）發表閉幕詞。

Thank you, Gary. On a personal note, this is my final conference call as President and CEO of Mercantile Bank Corporation, as I will retire at the end of May. It's been my pleasure to interact with you on these calls over the years, with the last seven being in this leadership position. Our company views these calls as important avenues of communication and transparency with our stakeholders. Ray and Chuck will be with you in July, reporting on our second quarter results and highlights.

謝謝你，加里。就我個人而言，這是我作為商業銀行公司總裁兼執行長的最後一次電話會議，因為我將於五月底退休。多年來，我很高興能在這些電話會議上與你們互動，最近七次電話會議都是擔任這項領導職務的。我們公司將這些電話視為與利害關係人溝通和提高透明度的重要途徑。Ray 和 Chuck 將於 7 月與您一起報告我們第二季的業績和亮點。

Thank you very much for your interest in our company. Best wishes to you all. This call has now ended.

非常感謝您對我們公司的關注。祝大家一切順利。本次通話現已結束。

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

會議現已結束。感謝您參加今天的演講。您現在可以斷開連線。